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York University sues former executive for “vast” fraud

Michael Markicevic named by York University as mastermind behind $250,000 phoney invoice racket

York University says Michael Markicevic received thousands of dollars in improvements to his Vaughan home as part of a phoney invoice racket at the school.

Michael Markicevic, former York University assistant vice-president of of campus services and business operations, bought an aircraft model like this one after the school fired him almost three years ago. He received $700,000 in severance pay.

Markicevic is alleged to have used school money to have home improvements done at his second home in Duntroon, near Colingwood.

By Tony Van AlphenStaff Reporter

Mon., Dec. 24, 2012

A former top York University executive received about $250,000 worth of home improvements including a Jacuzzi hot tub in a widespread phoney invoice racket that he masterminded on campus, the school alleges.

In a major lawsuit with supporting documents, York says former assistant vice-president of campus services and business operations Michael Markicevic used staff and construction materials from the university for work at two family homes, while the school unknowingly covered the costs through a “vast” scheme featuring scores of bogus invoices.

Sworn affidavits indicated the university paid for painting, carpentry, electrical work, landscaping, a concrete driveway and goods ranging from a video screen and shower doors to the hot tub at a Markicevic home in Vaughan.

Markicevic, a former Collingwood police officer, also got a free snow blower to clean the driveway when another key player in the scheme used a special university card to purchase goods, according to one affidavit.

In denying York’s claim, which also names 18 other individuals and six companies as defendants, Markicevic said it was a blatant attempt by senior employees to cut deals with authorities to minimize “their fraud” and falsely implicate him in serious wrongdoing.

“To the extent that such a scheme was perpetrated by other former employees, I did not participate in it,” he said. “It occurred entirely without my knowledge and I have not derived any benefit from it.”

The university’s claim concerning Markicevic, which remains unproven in court, is among a series of sensational allegations of “deceit, conversion and conspiracy” against the defendants involving more than $1.23 million between 2007-2009 and possibly earlier.

York said senior managers — who were entrusted and responsible for tightening the university’s loose procurement policies — abused that very system by approving false invoices from various suppliers that were inflated or never done.

The university alleged companies, who participated in the scheme, would take a chunk of money from an inflated contract or fictitious work and send it back to York officials through bank transfers or simple exchanges of bundles of cash in “a brown paper bag.”

“Through a vast and complicated conspiracy involving a variety of transactions and middlemen, the defendants were able to divert over $1 million in payments from York to themselves or to the benefit of their families, friends and/or other associated individuals,” the claim said. “They then conspired together one with the other to cover up and conceal their wrongful activities from York.”

Other players would pay off money they owed York managers through “finder’s fees” by offering construction services, the claim said.

York, one of Canada’s biggest universities, is suing the defendants for more than $4 million in damages for allegedly defrauding the school of public money.

It is also seeking a number of court orders including a demand that Markicevic repay almost $700,000 in severance money he received when York fired him almost three years ago. He bought a small imported aircraft after his departure.

Markicevic conceded in his statement of defence that off-duty York tradesmen performed some work at his houses in Vaughan and near Collingwood but he paid them. A senior York manager who owed him about $45,000 also provided construction services with university employees at his houses, Markicevic added.

In June, the Toronto Police Service laid criminal charges of fraud and laundering the proceeds of crime against Markicevic and Phil Brown, York’s ex-director of maintenance. Police provided few details about the scheme and other improprieties. Proceedings in that case resume next month.

York had filed its civil lawsuit in the Ontario Superior Court of Justice earlier in the year but its lawyers have added several hundred pages of affidavits, reports, interview transcripts, investigation notes and other documents in recent months which reveal far more about the explosive case.

A judge is currently considering some of that material in a York application for an order that would freeze Markicevic’s family assets so they would not be beyond the reach of a judgment against him. Ownership of two homes and the aircraft are in the names of other Markicevic family members.

Beyond allegations relating to the invoice scheme, York said Brown, who was also fired and is a defendant in the civil case, used his university procurement card to buy $46,300 worth of goods including flooring, furnishings and tiles at a Home Depot store but he did not provide any supporting documentation.

York claimed at least $7,600 didn’t end up on campus. Brown used purchasing cards of other employees without their knowledge, the university added. Brown has filed a notice of intent to defend himself but has not submitted a statement of defence to date.

York’s documents also contained information about incidents where the university ordered and paid for goods that never arrived.

Meanwhile, Dani Ierullo, York’s former associate director of facilities planning, renovations and parking under Markicevic, has admitted a significant role in the scheme but is not a defendant in either case after deciding to co-operate with investigators.

York said Ierullo took an undisclosed amount of money and has already agreed to pay restitution and return severance pay after the university fired him a few months after Markicevic.

But Markicevic said he never participated in any “kickback schemes” with Ierullo nor did he receive any benefits from him as a result of his former colleague’s “fraud.”

York carpenter Jack McCann, who is not a defendant, acknowledged in an interview with York lawyers that he gained between $20,000 and $30,000 from the scheme.

McCann, former president of Canadian Union of Public Employees Local 1356, said he co-operated with Markicevic and worked “hundreds of hours” at the houses out of fear of losing his job after experiencing verbal abuse from him.

In one incident, McCann said Markicevic threw “a stack of bills” on the office floor. Markicevic threatened to call security staff if he didn’t pick up the “free money” and would have told them the union official was offering a bribe, he said.

“I took the money,” McCann said, adding he gave a portion to Markicevic later.

Affidavits supporting York’s claim disclosed the university had received numerous complaints that Markicevic screamed, bullied and humiliated staff. “Markicevic was a tyrannical boss,” said one senior manager.

Markicevic said in one affidavit that he was aggressive but it was necessary to change York’s culture, improve accountability and reduce waste.

In addition to the claim for damages and Markicevic’s severance money, the university wants the defendants to return all profits and money wrongfully obtained from the alleged scheme and pay the costs of an extensive school investigation. York conducted an internal probe, hired outside forensic investigators and then turned over findings to police.

The university said Markicevic and Brown individually or collectively with other staff approved the unlawful invoices for cheque payments to the defendant companies or unidentified third parties.

In his defence, Markicevic said he recognized his signature on some of the invoices but repeated he didn’t know the companies or received any improper payments or benefits from any projects.

York alleged false invoices came from at least seven companies with links to Markicevic, Brown and other staff. Most of the firms were not preferred suppliers under the school’s procurement policy.

Two companies submitted more than 30 invoices totalling almost $375,000 for work they did not provide York, according to the university.

The documents also indicated how contractor Roman Ritacca paid “finder’s fees” to university officials after securing a major inflated contract for drain repairs in a school parking lot.

Ritacca, owner of a small construction company, told university lawyers he paid the fees through cash or free work at one of Markicevic homes and the residences of other school employees after getting the $700,000 project.

Ritacca, who hoped for more work from York but is now a defendant in the civil case, said he sometimes delivered the cash in a “brown paper bag,” including one time to Ierullo in front of Markicevic’s home in Vaughan near the high-end Eagles Nest Golf Club.

In an interview with York lawyers, Ritacca said he paid the fees to Ierullo in other locations and to some defendant companies on the director’s instruction.

“I understood that Dani was going to take care of it through the work I did at York,” said Ritacca in response to a question about how he received payment for the jobs at Markicevic’s houses.

The claim and Ritacca’s statements indicated York managers calculated the value of his labour and material purchases for the Markicevic homes at $122,300 which would come off the more than $300,000 in overbillings he collected on the repair contract.

Ritacca said he laid cement pads, built stairs, placed rocks, planted trees and put up a cedar fence at the Vaughan home. Other improvements there included the purchase and delivery of the Jacuzzi hot tub, he added.

University investigators found an invoice of about $9,000 for the tub which Markicevic picked out at a store, other affidavits said.

York also alleged three other employees worked hundreds of hours over two years at the homes under Markicevic’s watch. The university later dismissed those employees.

York’s claim and other documents also allege:

• Ierullo’s spouse owned a company called SBH that issued false invoices totalling about $90,000 to York and received payment but no delivery of goods. The company also issued invoices to other vendors for $43,000 although the firms provided no goods and services. Those vendors, in turn, sent invoices to York for payment.

• Markicevic and Ierullo approved a $22,000 “emergency” contract to a company for replacement of school locks and door hardware that avoided York’s policy for seeking three supplier quotes for work over $10,000. The company never performed the work because York staff conducted it. York still paid the invoice. Markicevic eventually got the cash “through a network of conspirators.”

• One company issued invoices totalling $42,800 for emergency water main repairs but it never did the work. Markicevic and Brown approved payment. But Markicevic received the money through “conspirators.”

• Another firm issued invoices totalling almost $20,000 for repairs and maintenance work after a flood at the school but the work was never done. Brown approved the invoices.

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